UK Government Announces The Deferment Of The Trivial Benefits Exemption.

Plans, announced in the 2015 Budget, to make limited company contractors and other small employers exempt from having to report trivial benefits have been shelved by the Government – for the time being at least because of the imminent election.

The news has received mixed reviews as you might expect, with some praising the decision and others less than happy. So as it stands, contractors and small employers must continue to declare taxable benefits in kind under £50.

The cap, which was unveiled in the 2015 Budget, was not labelled the cause of the delay by the Treasury, which it said owed to the “accelerated parliamentary process” that the bill was subjected to. The upshot of the delay means small firms and contractors will have to continue to use HM Revenue and Custom’s guidelines for declarations of any benefits in kind under £50, though these guidelines have been branded “imprecise” and “informal.”

What this means in the short term at least is that employers who have been considering changing their processes to reflect the commencement of an exemption for trivial benefits in kind under £50, will now have to shelve their plans and will have to revert to the original rules.

The news, as expected, was greeted with dismay by many small firms who would have benefited from the scrapping of the ruling, with some small business owners declaring the decision controversial. However, many accountants and tax legislation experts support the decision to delay the changes, though they do believe that in the longer term the changes will need to be applied.

A spokesperson for the Association of Taxation Technicians said:

“We felt that HMRC’s understandable zeal to eliminate scope for potential abuse of the proposed exemption had undermined its very purpose; namely the removal of the administrative burden of reporting tax and NIC on low value benefits.”

“We are therefore pleased to see that the measure has been dropped from the pre-election Finance Bill.”

“We hope that the Revenue will use the time afforded by the postponement to reconsider the finer details of some aspects of the policy.”

Steve Webb, employment tax director, KPMG, believes the delay can be attributed to a £300 cap on gifts to family members in close companies being recently announced as an anti-avoidance tax measure.

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